DCIT, New Delhi V. M/s. Indraprastha Power Generation Co. Ltd., New Delhi

ITA 2028/DEL/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7492 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 28-07-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 04-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K SAROHA
• Assessee Lawyers: SHRI K SAMPATH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: C: NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER, AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER ITA NO. 2028/DEL /2014 ASSESSMENT YEAR: 2010-11 THE DY.C.I.T VS. M/S INDRAPRASTHA POWER GENE RATION CO. LTD CIRCLE -1(1), HIMADRI RAJGHAT POWER HOUSE OF FICE COMPLEX NEW DELHI NEW DELHI P AN : AABCI 0243 H [APPELLANT] [RESPONDENT] DATE OF HEARING : 28.07.2016 DATE OF PRONOUNCEMENT : 03.08.2016 APPELLANT BY: SHRI A.K. SAROHA, CIT- DR RESPONDENT BY: SHRI SHRI K. SAMPATH & S HRI RAJ KUMAR ORDER PER CHANDRA MOHAN GARG, JUDICIAL MEMBER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE CIT(A)-XV, NEW DELHI, DATED 12/12/2013 PASSED IN FIRST APPEAL NO. 173/12-13/CIT(A)-XI FOR A.Y 2010-1 1 . 2. THE SOLE GROUND RAISED BY THE APPELLANT READS AS FOLLOWS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 75 CRORES MADE BY TREATING THE GRANT RECEIVED FROM THE DELHI GOVER NMENT AS REVENUE RECEIPT. 2 ITA NO. 3238/ DEL/2016 2 3. THE LD. DR FILED AN APPLICATION FOR ADJOURNMENT STATING THAT THE CASE RECORDS ARE AWAITED BUT FROM THE NOTE SHEET IT IS CLEAR THAT AMPLE OPPORTUNITIES HAVE BEEN PROVIDED TO SUBMIT RE CORDS, THEREFORE IN OUR CONSIDERED OPINION, ADJOURNMENT CANNOT BE GR ANTED AGAIN AND AGAIN ON THE CAUSE FOR WHICH THE A.O IS NOT RESPOND ING POSITIVELY. THUS, THE ADJOURNMENT APPLICATION FILED BY THE REVE NUE IS DISMISSED AND WE PROCEED TO HEAR THE APPEAL. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D HAVE CAREFULLY PERUSED THE RELEVANT MATERIAL PLACED ON R ECORD ON THE TRIBUNAL INTER ALIA ASSESSMENT ORDER AND ORDER OF T HE CIT(A). THE LD. CIT-DR SUPPORTING THE ACTION OF THE AO SUBMITTED TH AT THE GRANT RECEIVED BY THE ASSESSEE HAS BEEN USED FOR PURELY M EETING REVENUE EXPENSES ON VOLUNTARY RETIREMENT. THEREFORE, THE EN TIRE GRANT RECEIVED BY THE ASSESSEE IS BEING TREATED AS REVENU E RECEIPT IN THE HANDS OF THE ASSESSEE. THE LD. DR POINTED OUT THAT THE CIT(A) GRANTED RELIEF WITHOUT ANY BASIS. THUS THE IMPUGNED ORDER MAY BE SET ASIDE BY RESTORING THAT OF THE AO. THE LD. AR SUPPORTED T HE IMPUGNED ORDER AND CONTENDED THAT THE ACTION OF THE A.O WAS NOT SU STAINABLE. 5. ON CAREFUL CONSIDERATION OF THE ABOVE RIVAL SUBM ISSIONS, FROM THE RELEVANT OPERATIVE PART OF THE ORDER OF TH E CIT(A), WE OBSERVE THAT THE RELIEF WAS GRANTED TO BE BY OBSERV ING AS FOLLOWS: 3 ITA NO. 3238/ DEL/2016 3 6. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE, JUDICIAL PRECEDENCE IN THE CASE OF THE APPELLANT AND APPLICA BLE CASE LAWS IN THE MATTER. ON CAREFUL CONSIDERATION OF THE FACT S OF THE CASE, I FIND THAT PERHAPS THE LD. AO WAS NOT ABLE TO APPR ECIATE THE CORRECT NATURE OF THE TRANSACTIONS INVOLVED. IT APP EARS THAT IN PASSING THE ORDER, THE RELEVANT EXCERPTS OF WHICH A RE SHOWN IN PARA 4 ABOVE, THE LD. AO HAS MIXED UP THE FACTS BY TREATING GRANTS IN AID OF RS.39.10 CRORES AT PAR WITH THE LO NG TERM LOAN OF RS.35.90 CRORES FURNISHED BY GOVT, OF NCT OF DELHI AND HAS NOT BEEN ABLE TO APPRECIATE THE NATURE OF ACCOUNTING EN TRIES. ON CAREFUL CONSIDERATION, I FIND THAT THE APPELLANT HA D GIVEN DISTINCT ACCOUNTING TREATMENT FOR THE TWO. WHILE ON ONE HAND, THE AMOUNT OF RS.39.10 CROES IN RESPECT OF GRANT IN AID WAS REDUCED FROM THE EXPENDITURE BOOKED UNDER THE HEAD EMPLOYEES REMUNERATION AND BENEFIT' (SCHEDULE 19) AND ONLY AFTER REDUCING THE AMOUNT OF RS.39,10,70,611 THAT T HE APPELLANT HAD BOOKED THE NET AMOUNT OF RS.75,45,19,665 IN ITS P&L A/C UNDER THIS HEAD. THE SIMPLE ACCOUNTING INTERPRETATI ON OF THIS IS THAT THE APPELLANT HAD OFFERED AN AMOUNT OF RS.39.1 0 CRORES FOR TAXATION. WHAT THE AO OUGHT TO HAVE EXAMINED IS WHE THER THE APPELLANT HAD CLAIMED THE BENEFIT UNDER VRS STRICTL Y IN TERMS OF SECTION DDA OR NOT. HOWEVER, IT APPEARS THAT THE AO HAS NOT EXAMINED THIS ISSUE FROM THIS PERSPECTIVE. ON CAREF UL CONSIDERATION OF THIS ISSUE, I FIND THAT THE APPELL ANT HAD CLAIMED RS. 7,22,48,212 IN COMPUTATION OF INCOME AS FIRST I NSTALLMENT TOWARDS VRS EX-GRATIA BEING 1/5TH OF SUCH PAYMENT I N TERMS OF 4 ITA NO. 3238/ DEL/2016 4 SECTION DDA. IT IS ACCORDINGLY, EVIDENT THAT THE AD DITION OF RS.39.10 CRORES MADE BY THE LD. AO HAD NO SOUND BAS IS. 6.2 REGARDING THE BALANCE AMOUNT OF RS.35.90 CRORES , THE SAME WAS CLAIMED TO HAVE BEEN PROVIDED BY THE GOVT, OF D ELHI TO THE APPELLANT COMPANY FOR ENABLING THE PENSION TRUST FU ND TO MAKE THE PAYMENT FOR DISCHARGE OF LIABILITIES TOWARDS TH E EMPLOYEES OPTING OUT FOR THE VRS SCHEME. THE SHORT POINT IS T HAT THE PENSION FUND TRUST OF THE APPELLANT COMPANY, IN WHI CH CONTRIBUTION FROM THE EMPLOYER AND EMPLOYEES MAY HA VE BEEN MADE, WAS FOR THE PURPOSE OF ENABLING DISCHARGE OF LIABILITY TO THE EMPLOYEES AT THE TIME OF SUPERANNUATION/DEATH. THE SAME DID NOT ENVISAGE PAYMENT ON ACCOUNT OF VRS SCHEME. SINCE THE DELHI GOVT., WHICH IS 100% OWNER OF THE SHARE CAPIT AL OF THE COMPANY, DECIDED TO CLOSE THE OPERATIONS OF THE COM PANY, THE EMPLOYEES WHO HAD OPTED OUT FOR VRS WERE TO BE PAID THEIR DUES, FOR WHICH THE APPROVED PENSION FUND TRUST DID NOT HAVE ADEQUATE/PLANNED INVESTMENT. ACCORDINGLY, THE DELHI GOVT, DECIDED TO PROVIDE LONG TERM LOAN OF RS.35.90 CRORE TO THE APPELLANT, WHICH WAS PASSED ON TO THE PENSION FUND TRUST FOR ENABLING PAYMENT TO THE EMPLOYEES. THE APPELLANT HA S NOT CLAIMED THE BENEFIT OF THE SAME IN THE P&L A/C NOR IN THE COMPUTATION OF INCOME. THE OBSERVATION OF THE LD. A O THAT SUCH FUNDS WERE TO BE REFUNDED BY THE PENSION FUND TO TH E DELHI GOVT, AND NOT BY THE APPELLANT COMPANY, DOES NOT TA KE INTO ACCOUNT THE ACCOUNTING ENTRIES MADE BY THE APPELLAN T IN ITS BOOKS, WHICH CLEARLY SHOWS THAT ON ONE HAND, THE AM OUNT OF 5 ITA NO. 3238/ DEL/2016 5 RS.35.90 CRORES WAS SHOWN AS PAYABLE TO THE DELHI G OVT., ON THE OTHER HAND THE IDENTICAL AMOUNT WAS SHOWN AS RECEIV ABLE FROM THE PENSION TRUST. THE ONLY PLAUSIBLE INTERPRETATIO N OF THIS DOUBLE ENTRY COULD BE THAT THE AMOUNT OF RS.35.90 C RORES IS AN OUTSTANDING LIABILITY OF THE APPELLANT VIZ-A-VIZ TH E GOVT, OF DELHI AND OF THE PENSION TRUST VIZ-A-VIZ THE APPELLANT. T HE LD.AO IN HER WISDOM HELD IT AS INCOME OF THE APPELLANT, WHIC H HAS NO BASIS. IN VIEW OF THE ABOVE, THE ADDITION OF RS.35. 90 CRORE MADE BY THE LD. AO IS BEING DELETED. SINCE THE LD. AO HA S NOT CORRECTLY APPRECIATED THE FACTS, THERE IS NO NEED T O EXAMINE THE APPLICABILITY OF THE CASE LAWS CITED BY HER. 6. IN VIEW OF THE ABOVE, WE OBSERVE THAT THIS FACT REMAINED UNCONTROVERTED THAT THE ASSESSEE HAS CLAIMED RS. 7, 22,48,212/- IN THE COMPUTATION OF INCOME AS FIRST INSTALMENT TO WARDS VRS EX GRATIA BEING 1/5 TH OF SUCH PAYMENT AS PER TERMS SET OUT BY THE DRAWING AND DISBURSING AUTHORITY [DDA} AND THUS FIR ST LIMIT OF ADDITION OF RS. 39.10 CRORES HAS BEEN DISMISSED. F URTHER, FROM THE ORDER OF THE CIT(A), WE ARE ALSO IN AGREEMENT W ITH THE CONCLUSION AS RECORDED BY THE FIRST APPELLATE AUTHO RITY THAT SINCE THE GOVERNMENT OF DELHI, WHICH IS 100% OWNER OF THE ASSESSEE COMPANY, THE EMPLOYEES WHO OPTED FOR VRS [VOLUNTARY RETIREMENT SCHEME] WERE TO BE PAID THEIR DUES FOR W HICH APPROVED PROVIDENT FUND DID NOT HAVE ADEQUATE/PLANN ED INVESTMENT THUS THE GOVERNMENT DECIDED TO PROVIDE L ONG TERM 6 ITA NO. 3238/ DEL/2016 6 CAPITAL LOANS OF RS. 35.90 CRORES TO THE ASSESSEE W HICH WAS PASSED ON TO THE PENSION FUND TRUST ENABLING THE CO MPANY TO MAKE PAYMENTS TO THE EMPLOYEES. IN VIEW OF THE ABOV E NOTED FACTUAL MATRIX OF THE CASE ON THE ISSUE WE ARE UNAB LE TO SEE ANY VALID REASON TO INTERFERE WITH THE CONCLUSION OF TH E CIT(A) THUS WE UPHOLD THE SAME. ACCORDINGLY, THE SOLE GROUND O F THE REVENUE BEING DEVOID OF MERITS IS DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 03.08. 2016. SD/- SD/- (S.V. MEHROTRA) (C.M. G ARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 03 RD AUGUST, 2016 VL/ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI